Not understood this topic clearly, but this is surely a problem to us(living in US).
New Delhi: A change in the definition of 'Resident but Not Ordinarily Resident Indians' (RNOR) in the Finance Act 2003 will have severe repercussions on software professionals employed in the United States, the Indo-American Chamber of Commerce (IACC) said on Monday.
In a communication to Finance Minister Jaswant Singh, IACC President V Rangaraj said the changed definition will have serious implications, particularly on the growing IT industry in India. He said in the Finance Act 2003, the new definition of RNOR stipulates that only persons who have resided abroad continuously for nine years or who have been physically present in India for less than 730 days in the last seven years, will get the RNOR status.
Prior to 2003, those with RNOR status were taxed only on their income earned in India. "This means two-way travel of professionals between India and the US in the coming years will have to be more than it is today, especially when we have set a target of $ 50 billion IT exports by 2008," Rangaraj said.
Two-way mobility of professionals on a continuous basis is imperative to execute the offshore and on-site projects, the letter says.
Of the total IT exports of $13.5 billion from India, the US had a lion's share of around 60 per cent in 2003-04. Rangaraj has also said that many Indian IT professionals working in the US returned to India to work for Indian affiliates of the US companies to set up their own busnesses.
Very few of them have been Non-Resident Indians for seven to nine years. This would mean that any income that accrues to them abroad, including the income from their individual retirement accounts will now be fully liable to Indian taxation from the year of their return.
By this measure, around 31.5 per cent of their income earned in their US pension accounts would be the tax paid by them. Even professionals who have been continuous non-residency for seven to nine years would have to think very carefully in view of the limited transition period of two years, the letter says. They must pay an income tax on their world income once they complete two years of residency in India.
This would increase resistance of many highly talented professionals to relocate to India and join US affiliates or to go in for start-ups in India, he has said. As a result, employment generation may lower, as well as the income of Indians.
New Delhi: A change in the definition of 'Resident but Not Ordinarily Resident Indians' (RNOR) in the Finance Act 2003 will have severe repercussions on software professionals employed in the United States, the Indo-American Chamber of Commerce (IACC) said on Monday.
In a communication to Finance Minister Jaswant Singh, IACC President V Rangaraj said the changed definition will have serious implications, particularly on the growing IT industry in India. He said in the Finance Act 2003, the new definition of RNOR stipulates that only persons who have resided abroad continuously for nine years or who have been physically present in India for less than 730 days in the last seven years, will get the RNOR status.
Prior to 2003, those with RNOR status were taxed only on their income earned in India. "This means two-way travel of professionals between India and the US in the coming years will have to be more than it is today, especially when we have set a target of $ 50 billion IT exports by 2008," Rangaraj said.
Two-way mobility of professionals on a continuous basis is imperative to execute the offshore and on-site projects, the letter says.
Of the total IT exports of $13.5 billion from India, the US had a lion's share of around 60 per cent in 2003-04. Rangaraj has also said that many Indian IT professionals working in the US returned to India to work for Indian affiliates of the US companies to set up their own busnesses.
Very few of them have been Non-Resident Indians for seven to nine years. This would mean that any income that accrues to them abroad, including the income from their individual retirement accounts will now be fully liable to Indian taxation from the year of their return.
By this measure, around 31.5 per cent of their income earned in their US pension accounts would be the tax paid by them. Even professionals who have been continuous non-residency for seven to nine years would have to think very carefully in view of the limited transition period of two years, the letter says. They must pay an income tax on their world income once they complete two years of residency in India.
This would increase resistance of many highly talented professionals to relocate to India and join US affiliates or to go in for start-ups in India, he has said. As a result, employment generation may lower, as well as the income of Indians.